Perception Gaps

 A recent survey “revealed” a big disconnect between participants and plan sponsors — or did it?

The survey, conducted from mid-January to mid-February earlier this year by Voya, found that while 91% of sponsors thought participants were either very or somewhat prepared for retirement, “just” 69% of participants felt that way. A finding that I think it’s fair to say surprised — well, probably no one. 

Indeed, I’m sure there are any number of advisors out there who saw this as an opportunity to tell plan sponsors that while they may THINK the participants they serve and support are in good shape, their reality may be different. Particularly since this survey also found that advisors’ perspective was pretty much aligned with that of the participants surveyed.  

But could plan sponsors’ “read” of participant readiness really be so strong as to be so out of touch with participants’ perception? The authors of the report opined that the bull market might explain the level of plan sponsor positivity (which apparently is a consistent finding), though elsewhere in the report it cites that market volatility has been a factor of concern for participants — and so, one might suppose that, depending on when you responded to the survey, you might be inclined to feel better — or not — depending on the state of the market at the time (in fairness, the authors note that participant confidence has INCREASED since 2023, up from 63%). 

But as I thought about the data — or rather the conclusions drawn there — I noted that these are separate surveys of participants and plan sponsors — not just in time, but in…location. These are NOT the participants in the plans overseen by these specific plan sponsors, and these participant sentiments expressed are from participants not under the guidance/purview of the surveyed plan sponsors.[i] Perhaps if the plan sponsors associated with these particular participants’ plans were surveyed, they’d have a more muted confidence. Similarly, if the survey focused on participants in the plans overseen by this particular group of plan sponsors — well, they might actually be in a better situation, and thus more confident.

But even then, there’s a high likelihood that the vast majority of the participants surveyed have NEVER made even a single attempt to figure out their retirement needs/target,[ii] and so when asked about their level of confidence … well, it’s pretty likely to be an “uninformed” assessment. You can, of course, be confident — or lack confidence — for no good reason.  And who’s to say that the evaluation of the plan sponsors — who may have no specific sense of the retirement needs of their participant base — is any more credible?

Let’s face it — a macro view of the plan’s participant readiness (not to mention that some plan sponsors are more cognizant of such things than others) is almost certainly going to vary from the micro perspective of an individual. It’s not quite apples and oranges, but it’s at least comparable to assessing the quality of a bushel of apples compared to a couple at the bottom of the basket.

Beyond that, when you look inside the numbers of the Voya survey you see that just 17% of participants considered themselves VERY prepared — and only 27% of plan sponsors characterized their participant readiness as “very” prepared. So, while there’s a perception “gap,” it’s not as wide as the headlines proclaimed. 

All this by way of saying that while there is value[iii] in comparing (and contrasting) the perspectives of plan sponsors and participants from different places, at different times with different levels of understanding and evaluation…

Well, it’s a good idea to keep those differences in mind — particularly when trying to close those gaps in perception.

  • Nevin E. Adams, JD     

 

[i] I suppose some accidental overlap IS possible, but it seems unlikely.

[ii] If that question was asked, it wasn’t obvious from the results. Again, while confidence readings are easy to take, if you have no idea what you need (and perhaps a dated idea of what you have), I would argue it’s of little use in terms of gauging reality.

[iii] And, dare I say, click-throughs…

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